An astounding read on housing

A report from Wells Fargo reveals a booming mortgage business -- and a U.S. economy in fine shape.

By Jim Cramer Jul 16, 2012 9:22AM

Beginning this week we won't have time -- at least most of us won't -- to do enough work on individual quarterly reports as they happen. The next three weeks will be sheer hell, and I am always amazed when generalists have claimed they've seen more than just the cheat sheet of the reports -- the CliffsNotes, so to speak.


But last week was different. If you took the time out to read the report of Wells Fargo (WFC) -- and, believe me, there was time to do it -- you would have been pretty much stunned at how much business it's doing and at how strong the mortgage business is in the U.S.


Put the following facts in perspective from a company that has more than 30% of the mortgage market in this country.
  • Mortgage business revenue was up 90% from a year earlier and 11% from the prior quarter.
  • Revenue from refinancing was up more than $19 billion, or 43%, from the first quarter, "indicating continued strength in the overall housing market, where we see increases in sales and pricing in markets throughout the country, even some of the hardest hit areas during the slowdown," according to CEO John Stumpf.
  • A 31% increase was achieved in commercial loan growth, through portfolio acquisitions and organically increased credit card penetration.
  • Credit quality continued to improve, with the charge-off ratio declining to 1.15%, the lowest since 2007.
  • Nonperforming assets declined by $1.8 billion from the first quarter, down 11% from a year earlier.
  • Record net income rose by 17%, with earnings per share up 17% from a year earlier.
  • "Mortgage volumes have been much stronger than anyone expected a year ago or even three months ago, for that matter, with originations more than double where they were a year ago, and our mortgage pipeline, which should lead to future revenue and expense growth, has also doubled," according to CFO Timothy Sloan.

These are astounding numbers. They're the kinds of numbers that signal a gathering strength in housing, something that few people expected and fewer still had thought possible, given that the economy was supposed to have hit a wall a few months ago.


When the largest bank for mortgages reports these numbers, you simply have to rule out the kind of slowdown the employment numbers suggest to us. You have to conclude otherwise. The numbers from Wells are just too big.


I have been a believer in Wells ever since the bank got its arms around the portfolio it bought from Golden West via Wachovia.


That deal -- which no one, other than Wells Fargo, would ever admit was cheap -- now does look incredibly intelligent for this simple reason: The amount of national coverage Wells bought otherwise never would have been allowed by regulators. Wells basically got control over most of the country's mortgage market and servicing market. It services an astounding $1.9 trillion in residential mortgages, with an amazing ability to cross-sell, in return for two years of outsized losses.


Put simply, Wells Fargo is telling you that housing is back and that it is booming and that this moribund part of the economy is now a huge tailwind, not a headwind. Can housing carry the economy? No. Can it offset sluggish employment? I'm beginning to think it can, and that's the main reason the market was able to reverse direction and go up at the end of last week. When you consider the good commercial lending by JPMorgan Chase (JPM) and the mortgage lending by Wells, you basically come back with a picture of the U.S. being in fine shape, by far the best of all economies around the world, save for China. It emerges as an economy with increasing strength, not declining strength, as we head into the second half of the year.



Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and is long JPM.




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Jul 16, 2012 3:11PM

Can someone PLEASE yank the crack pipe out of this idiot's hands!! The most bias inaccurate article I've ever read. Last I've read unless you have a 780 credit score or better, are gainfully employed and have cash on hand the odds of a re-fi or purchase are slim to none. They lied before and they'll lie again. Customer service with WF, BofA, Chase etc. to name a few are disgusting - you are literally nothing but a number. I've had  accounts with each simultaneously and they all suck. In fact, they'll all burn in hell for what they did to this country and taking everyone one who is with them, with them. I now have (and HIGHLY RECOMMEND) a good old fashioned credit union; no lines, they call me by name and fees (if any) are very reasonable.  Am I speaking strictly out of emotion? Absolutely however, "I've been there and done that" and all these "mega-banks" don't live by the golden rule. They're just wolf's in sheep’s clothing seeking who they can devour (Amen to that and man that felt good)….

Jul 16, 2012 2:51PM
Housing is back?  Really?  Coulda fooled me.

I feel like I'm reading something from The Onion every time this Cramer dufus sits down at the keyboard.

And where, pray tell, Mr. Allknowing Cramer, will people get the money to buy/build new homes?  There are still no good jobs out there, and the jobs that exist are all on pretty shaky ground.

Here we are glimpsing the beginning of the greatest financial crisis in human history (08-10 was just a warmup, folks), and all Cramer has to say is "housing is back".

Does he think we're really that stupid?

Jul 16, 2012 10:08AM

Those "great" numbers are driven by the the lowest long term mortgage rates in modern history.  The 30 year rate was in the 4.++% range in 2011 and now in the 3.++% range in 2012.  Can they drop another point next year to keep that party going, maybe.  But, the party is going to stop soon because these rates cannot get much closer to 0%.  The hangover from the party will begin when (if?) rates start rising, especially if rates go up without improvement in income and employment.   

Jul 16, 2012 10:05AM

everything you listed applies to refi's and general financing. 


but just because the banks might finally get their act together on loans doesn't mean "housing is back"

Jul 16, 2012 2:14PM
Wells Fargo=Banking Criminal Cartel=Liars always tell the truth=Housing is really going off the CLIFF !  20 million mortgages in some state of default or foreclosure ! 10 million borrowers underwater on their loans ! The Banking Cartel has another 10 million properties sitting in their Shadow Inventory not being released fo Sale !  YEAH ! HOUSING IS LOOKING GREAT MUST BE ON MARS !
Jul 16, 2012 10:21AM
The reason why mortgage business is up 90% is because Wells stopped using an outside mortgage broker as a result of the $175 milion government settlement.  The increase in Wells surely is offset by a decrease elsewhere.  Cramer is a hack.
Jul 16, 2012 3:54PM

In case you haven’t figured it out yet, this column is an advertisement, not a financial advice column. They will write a story with an opinion slanted to whatever the paying client wants to broadcast to the public. It’s not just talk shows, the Morning Show, and shock news channels that work this way anymore. It’s how 90% of the entire mainstream media works these days. Who would have ever thought that the horrific future vision of the media industry in the old movie “Network” (circa 1976) would become so lame and dated? Don’t get angry, just sit back and laugh at the show. It’s a farce; like a comedy act; sometimes better than a Seinfeld rerun.

Jul 16, 2012 3:55PM
I don't know where you live, but just about everything sucks around here.
Jul 16, 2012 2:41PM



this is so crazy.....

Wells Fargo???

r u kidding??

they have the WORST customer service record of ANY mort funder........

houses r totally for sale.....prices being reduced.......ask any realtor

its a NIGHTMARE for them....


JP Morgan Chase???

so they can " write off " ANOTHER 9 BILLION ???


Housing is NOT back

Wells/Wachovia are bad and will be under Federal inditement by end of  '12


this is one WILD AND CRAZY guy!!!!

Jul 16, 2012 2:14PM
What percentage of these refinances are part of the Harp Program, with loan to values of 125 percent of home value and guaranteed by the federal government?
Jul 16, 2012 5:03PM
I have a credit score just under 700, I just bought a home, and got 3.25% int rate. I saved my money, I don't buy things I can't afford. I don't finance things with no money down, it just doesn't make sense to me. Just because you can get it America doesn't mean you should. I don't trust the Rep or the Dems, politicians say want we want to hear to get elected. Wake up idiots!!!!
Jul 16, 2012 2:29PM
You have got to be kidding me. How can you have a real housing recovery without jobs and income growth? Just look at how many houses are sitting with dead landscape and notices in the windows. These banks want the president to win, so the shadow inventory will keep being trickled to market, and the misery will still be prolonged till after the election. Bottom line is, the foundation for a truely sustainable housing recovery has not been established. All this delusion is designed to drive up the price of the builder stocks.
Jul 16, 2012 2:01PM

What I find interesting about the article and Mr. Cramer, is that he Did Not include any numbers from other mortgage companies. This leads me to believe one thing...Wells is the only one with positive growth (which might be attributed to fancy/funny accounting or maybe it is just a one off because of aggressive marketing, low interest rates and other incentives that make them the financial institution of choice right now).

Unless the industry across the majority are seeing the same type of growth, Mr. Cramer should clarify and put that disclaimer up front. It is not hard to see there is something suspicious about the article with no disclaimer and only info from one institution represented.

I am suprised this was even published as anyone with any college level english understands how this will look without the big picture look or acknowldegement of limited data collected.

Jul 16, 2012 1:12PM
Anybody who would listen to financial advice from a scumbag with a proven track record of failure like his will get what they deserve. He is a Wall Street whore who is willing to tell you what ever gets you off.
Jul 16, 2012 11:33AM
Did someone pay him to say this? Ya there are refi's going on and short sales and bank sales. If you have perfect credit you can get a loan...
Jul 16, 2012 9:57AM
I hope your right. Of course 3.5% interest and 40% home devaluation helps. Deflation actually helps the economy turn around.
Jul 16, 2012 2:21PM
I would have to agree with some of the other comments . "
and a U.S. economy in fine shape" . Really ? We are approaching a new recession . 
Jul 16, 2012 1:36PM
Cramer is an idiot.  DOUBLE SPEAK MOUTH PIECE FOR THE GOVT.  A nobel prize to a moron that understands little.  Reminds me of another man who has a nobel under his belt.  Hear this CRAMER the average house price and the average salary must meet.   We are not there yet.  Taking massaged data from the banksters... really now?  These are the same folks that rigged and broke the financial markets globally.  Yeah sure I believe...   not on your life knuklehead
Jul 16, 2012 11:53AM

Maybe the housing market is coming back to WF because they are now applying appraisals that are not 10% below even this depressed market. Frankly anyone who thinks the housing market is back is not looking at the resales of what is selling.

There may be a lot of reasons but probably because WF has changed some lending policies and not because the market is back.

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